Rand eyes R13 to the dollar ahead of CPI data
The South African rand moved tentatively towards its next resistance level against the US dollar on Wednesday, as the market reacted to speculation around the ANC considering an early recall for president Jacob Zuma, and ahead of CPI data expected later in the day.
The rand reached a one-month best in the previous session, amid reports citing anonymous senior ANC officials that the recall of president Zuma could be discussed at the party’s coming NEC meeting.
Despite the ANC rubbishing the reports, the rand strengthened to R13.17 to the US dollar by the end of Tuesday’s session.
“The price action in the rand yesterday once again demonstrated the extent of the long dollar positioning against the rand, despite the exceptional unlikely scenario of the ruling party removing the president,” analyst at Nedbank Reezwana Sumad told Reuters.
On Wednesday, the rand held onto its gains, and managed to strengthen to R13.02 to the dollar by 09h45, with the market anticipating positive CPI figures from Stats SA.
According to market analyst at Nomura, Peter Attard Montalto, while Wednesday’s CPI data is expected to be more positive, in the larger picture of the South African economy, it will be muted, with little to no impact on the country’s growth narrative.
“We think short-run CPI inflation forecasts may fall very slightly, but expect no change
through end-2018 and 2019 – equally we do not think growth forecasts will change
particularly significantly,” he said.
The analyst said that markets will next set their eyes on the next monetary policy committee meeting (MPC) where the question of a possible rate cut will fall front-and-centre.
Nomura holds that an end to rate hikes does not necessarily mean a start to rate cuts, and believes that the Reserve Bank will proceed with caution and more than likely hold rates.
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